Labuan Securities Licensee

The Guidelines on the establishment of Labuan Securities Licensee including Islamic Securities Licensee issued by the Labuan Financial Services Authority (“FSA”) took effect on 1 January 2014.

Labuan securities licensee refers to a person who for valuable consideration provides investment advice or administrative services in respect of securities for purpose of investment and dealing in securities. For a Labuan Islamic securities licensee, its operations shall comply with Shariah principles.

The Labuan fund manager is differentiated with Labuan securities licensee, through the provision of management services, which is its principal activity. In addition, Labuan securities licensee is not allowed to hold clients’ monies or assets.

 

APPLICATION FOR LABUAN SECURITIES LICENSEE

Any person intending to undertake securities licensee activities may submit an application to Labuan FSA.

Kensington Trust Labuan Limited is a licensed trust company in Labuan and is able to assist you with license application, establishment and administration of your Labuan company.

 

PERMITTED ACTIVITIES

 

 

WHO IS ELIGIBLE TO APPLY

  • An individual who holds a relevant degree or professional qualification to carry on activities of a securities licensee. Labuan FSA may also consider an applicant with at least minimum qualification of diploma holder and 3 years’ relevant experience in capital market or direct experience in the permitted activities of a securities licensee;
  • A licensed/approved individual who undertakes such permitted activities from relevant regulatory and supervisory Authority or a jurisdiction who is a member of the International Organization of Securities Commission (IOSCO); or
  • A person who does not fulfil the above may also be considered, provided that the Labuan securities licensee are run and managed by suitably qualified and experienced individuals.

 

LABUAN SECURITIES LICENSEE LICENSE FEE

Processing Fee (once-off)
RM1,000/-

Annual Fee
RM5,000/-. The annual license fee is payable when the license is approved by Labuan FSA and remains valid until 31 December of the year of approval. All licensees are required to pay to Labuan FSA subsequently the annual license fees on or before 15 January of each calendar year.

 

OPERATIONAL REQUIREMENTS

  • Maintain a paid-up capital unimpaired by losses of at least RM150,000 equivalent in any foreign currency throughout its operations. In addition, based on the securities licensee’s risk management assessment, additional capital may need to be injected to commensurate its risk profile as well as the nature and complexity of its business.
  • Maintain a professional indemnity insurance policy with coverage of not less than RM1 million or its equivalent in any foreign currency throughout its operations.
  • Maintain registered office in Labuan. May apply for marketing office at Kuala Lumpur and/or Iskandar Malaysia.
  • Conduct its business in any foreign currency other than Ringgit Malaysia unless permitted in the Labuan Companies Act.
  • Appoint approved auditor.
  • Submission of audited financial statements and other statistics/information to Labuan FSA.

 

LABUAN IBFC TAXATION SYSTEM

    1. Labuan Business Activity Tax Act 1990 (“LBATA”) governs the imposition, assessment and collection of tax on a Labuan business activity carried on in, from or through Labuan.
    2. Labuan entities that carry on a non-Labuan business activity are subject to the provisions of the Malaysian Income Tax Act, 1967 (ITA).
    3. “Labuan business activity” means:
    • a Labuan trading or a Labuan non-trading activity carried on in, from or through Labuan,
    • excluding any activity which is an offence under any written law.
    1. “Labuan trading activity” includes banking, insurance, trading, management, licensing, shipping operations or any other activity which is not a Labuan non-trading activity. The Labuan entity shall pay 3% of net profits as per audited accounts.
    2. “Labuan non-trading activity” means an activity relating to the holding of investments in securities, stock, shares, loans, deposits or any other properties by a Labuan entity on its own behalf. Such activity is not subject to tax under LBATA.
    3. Labuan companies carrying on both Labuan trading and non-trading activities will be deemed to be carrying on Labuan trading activities. Hence, it will have the same tax treatment as those undertaking Labuan trading activity mentioned above.
    4. Substance requirements under Labuan Business Activity Tax Regulations 2018:
    • To benefit under LBATA, a Labuan securities licensee company will need to comply with the substance requirements of minimum number of two (2) full time employees in Labuan and an annual operating expenditure in Labuan of RM100,000.

 

DEALINGS WITH RESIDENT

All Labuan entities are allowed to conduct transactions with residents of Malaysia in Ringgit Malaysia. “Resident” here means:

  • in relation to a natural person, a citizen or permanent resident of Malaysia; or
  • in relation  to any other person, a person who has established a place of business, and is operating in Malaysia.
  • and includes person who is declared to be a resident pursuant to s.43 of the Malaysian Exchange Control Act 1953.

The amount of deductions allowed in respect of payments made by Residents to Labuan entities are as follows:-

>  Interest expense67% deductible
>  Lease rental67% deductible
>  General reinsurance premiums100% deductible
>  Other type of payments3% deductible

 

ADVANTAGES & KEY BENEFITS OF LABUAN SECURITIES LICENSEE

  • ZERO withholding tax on payments of dividend and interest to non-residents.
  • No stamp duty on all instruments relating to offshore business activities including share transfer.
  • No import duty / sales tax.
  • No foreign exchange controls.
  • No capital gain tax / inheritance tax.
  • Double Tax Agreements between Malaysia and over 70 countries.
  • 50% tax abatement for expatriate professionals and managers employed under Labuan companies.
  • 100% exemption for director’s fees received by non-citizen directors of Labuan companies.